TIDMKOOV
RNS Number : 7544F
Koovs PLC
17 July 2019
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) No 596/2014 ("MAR"). Upon the
publication of this announcement, this inside information is now
considered to be in the public domain.
17 July 2019
Koovs plc
("Koovs", the "Company" or the "Group")
Trading Update for FY 2020 & Preliminary results for the
year ended 31 March 2019
104% improvement in FY 2020 Q1 trading year on year
Koovs plc (AIM: KOOV), the Western fashion experts for online
Indian consumers, provides a Trading Update for FY 2020 and
announces its Preliminary Results for the year ended 31 March 2019
(the "Year"). We set out below (A) highlights from our Preliminary
Announcement and Trading Update for FY 2020; and (B) our
Preliminary Announcement.
(A) Highlights and Trading Update for FY 2020
The Board is pleased to report that the recovery experienced in
the final three months of the last financial year has continued
into the first three months of the current financial year with
Gross Order Value up 104% ahead of the same period last year at
GBP4.82m. This, coupled with the Future Lifestyle Fashion Limited
("FLFL") subscription agreement secured at an average price of 15
pence per share, ensures the business is well positioned to deliver
on its growth strategy.
Lord Waheed Alli, Chairman of Koovs, commented: "Koovs is firmly
back on track evidenced by the 104% growth experienced in Q1
trading. We are excited about the rest of the year, as we continue
to invest in both marketing and our product range."
Financial Highlights FY2019
-- Gross Order Value ("GOV") stood at GBP12.8m (FY 2018: GBP14.8m)
-- Net Sales were GBP7.5m (FY 2018: GBP9.6m)
-- Adjusted EBITDA loss* reduced to GBP12.9m (FY 2018: GBP13.9m)
-- Trading margin increased to 18% (FY2018: 14%)
-- Web traffic 75.9m (FY 2018: 65.9m)
-- Conversion rate 1.1% (FY 2018: 1.4%)
-- Total of GBP22.1m new funds raised during the period
Operational Highlights FY2019
-- Strategic partnership initiated with FLFL
-- Technical services contract signed with FLFL
-- 4 year media for equity deal with HT Media
Post Year End
-- Subscription agreement with FLFL to invest additional GBP10.5m
-- Q1 FY2020 GOV increased by 104% to GBP4.82m (Q1 FY19: GBP2.36m)
-- Q1 FY2020 Trading margin increased to 21%
-- Q1 FY2020 Web traffic growing strongly, up 148% to 26.35m (Q1 2019: 10.6m)
-- Q1 FY2020 Conversion rates recovering to 1.3%
Current Trading
Current trading is in line and on target to deliver market
expectations for FY2020.
Mary Turner, Koovs' Chief Executive Officer, added: "Building on
the success in the last three months of FY2019 we expect to return
to significant full year growth in FY2020 with a focus on securing
a continued improvement in trading margins. The recent funding
secured from FLFL will fuel our ability to continue to invest in
marketing to increase traffic levels, together with an expansion in
our product offering, designed to lift conversion rates."
Future Market Communications
In order to continue to build the depth of investors'
understanding of the business, the Board intends to provide the
market with quarterly trading updates over the next 12 months to
the end of 2020; these updates will be in addition to the
regulatory requirement to report, inter alia, its interim and full
year results.
*Loss before interest, tax, depreciation, amortisation and
non-cash share-based payment charges.
(B) Preliminary announcement - results for the year ended 31
March 2019
Financial Highlights
-- Revenue increased to INR590m/GBP6.4m (FY 2018: INR543m/GBP6.4m)
-- Adjusted EBITDA loss* at INR1,183m/GBP12.9m (FY 2018: INR1,183m/GBP13.9m)
-- Gross loss reduced to INR49m/GBP0.5m (FY 2018: INR147m/GBP1.7m)
-- EPS loss reduced to 5.3p (FY 2018: loss of 8.3p)
-- Total of GBP22.1m new funds raised during the period
Operational Highlights FY2019
-- Strategic partnership initiated with FLFL
-- Technical services contract signed with FLFL
-- 4-year media for equity deal with HT Media
The Group's annual report and accounts will be posted to
Shareholders in the coming days, and will be available shortly on
the Group's website.
*Loss before interest, tax, depreciation, amortisation and
non-cash share-based payment charges.
For further information please contact:
Koovs plc
Mary Turner / Robert Pursell
Tel: +44 (0) 20 7151 0170
Strand Hanson Limited (Nominated & Financial Adviser)
James Harris / Ritchie Balmer / Georgia Langoulant
Tel: +44 (0) 20 7409 3494
Whitman Howard Limited (Corporate Broker)
Nick Lovering (Corporate) / Mark Murphy (Institutional
Sales)
Tel: +44 (0) 20 7659 1234
Media enquiries and publication images:
Newgate Communications
Adam Lloyd / Fiona Norman
Tel: +44 (0)20 3757 6880
Koovs@newgatecomms.com
The information contained within this announcement is considered
to be inside information prior to its release, as defined in
Article 7 of the Market Abuse Regulation No.596/2014 and is
disclosed in accordance with the Company's obligations under
Article 17 of those Regulations.
Notes to Editors:
About Koovs
-- Koovs is a UK business that has built KOOVS.COM into India's
leading online western fashion destination. Koovs' fashion brands
are designed and developed in London exclusively for the young
Indian fashion market where two thirds of the population are under
the age of 35. It has 2.7m online social followers.
-- The tremendous potential of the Indian fashion market has
been further underlined by the Strategic Partnership with Future
Lifestyle Fashions Limited (FLFL) which is part of Future Group -
one of India's leading retail businesses and one of the top 10
fashion apparel companies in the world.
-- Koovs' proprietary online technology platform powers
KOOVS.COM and is a proven market-leading success in India's rapidly
expanding e-commerce market. The capability and scalability of the
platform has been recognised by FLFL which has contracted Koovs to
build and maintain the online platform for its Brand Factory retail
format. For more information, please visit www.koovs.com and follow
us on Facebook, LinkedIn, Twitter @mykoovs and Instagram
@koovsfashion.
CHAIRMAN'S STATEMENT FOR THE YEAR TO 31 MARCH 2019
Dear Shareholders,
The last two years have been especially challenging for Koovs.
The disruptions in India caused by demonetisation and the
introduction of the Indian Goods and Sales Tax (GST) in July 2017
were a significant brake on Koovs online retail activity levels
throughout FY18 and into the first half of FY19. Despite a good
recovery in Gross Order Value (GOV) and trading margin in the
second half of the year, the results for FY19 have reflected these
regulatory challenges.
In response to these challenges, the Board performed a review of
the Group's operations in FY18 to identify medium-term objectives
to support our future growth plans. As a result, the Board took the
decision to reset the Group's objectives, targets and five-year
plan for growth with a view to securing new investment to fund the
plan.
In many respects and despite the disruptions in India, FY19 has
been an encouraging year for Koovs: it has seen new funds of GBP22m
(excluding the cost of funds raised of GBP1m) successfully injected
into the business with commitments for a further GBP23m; the
strategic relationships with both Future Lifestyle Fashions Limited
("FLFL") and HT Media Limited ("HT Media"); the Technical Services
contract signed with FLFL and the recovery in GOV and trading
margin in the second half of the year. With the green shoots of
recovery firmly established, there is a clear opportunity to
capitalise on the platform we have built to deliver positive growth
in shareholder value over the coming years.
Successful fundraising puts Koovs back on track
We secured funding from key strategic and institutional
investors: FLFL, part of Future Group, one of India's largest
retail groups, and HT Media, owner of the Hindustan Times and one
of India's largest and most influential media companies. The
funding has put Koovs back on track and we are now able to focus
our efforts on the day-to-day operations and deliver on our
strategy by resuming our growth plan over the coming years. We are
delighted by the support we have received from investors who share
our vision.
Strategic relationships
The strategic relationship with FLFL represents a
transformational deal for Koovs. Since the end of FY19 FLFL have
invested a further GBP3.7m and have subscribed for an additional
investment of GBP6.8m. The relationship is expected to deliver
synergies across the value chain from manufacturing and
distribution to market reach, marketing and customer engagement.
Current projects underway include:
-- Provision of technical services (in FY19 and FY20) to Brand
Factory including an ongoing maintenance contract (FY20);
-- Koovs concessions opened in three Central stores in Delhi
over the period. We are now rolling out this
-- concession model to another five stores in Bangalore (two stores), Hyderabad, Pune and Noida;
-- Studio Services agreement to use Koovs studio facilities to
shoot catalogue images and videos for up to 1,000 products per
month; and
-- An agreement to sell a curated selection of FLFL products on the Koovs online platform.
The strategic relationship with HT Media gives Koovs the option
to acquire an additional three GBP6.0m tranches of media from HT
Media. Each of these tranches, if called by Koovs, will be funded
by HT Media investing a further GBP4.3m per tranche in the Group.
The agreement will give the Group premium exposure with which to
further build the Koovs brand and will provide the business with an
important platform to support future growth in the world's fastest
growing economy.
Technology Platform delivers new opportunities for growth
Koovs proprietary online technology platform powers Koovs.com
and is considered a market-leading success in India's rapidly
expanding e-commerce market. The capability and scalability of the
platform has been recognised by FLFL which has contracted Koovs to
build and maintain the online platform for its Brand Factory retail
format. Under the terms of the contract, Koovs received one-off
fees of $1.05m and $0.35m respectively for the development and
integration of the Brand Factory online platform and an ongoing
maintenance fee for an initial term of 24 months. ($1.05m revenue
has been recognised in FY19, $0.35m will be recognised in FY20 and
maintenance revenue will be recognised in FY20).
Leading customer engagement and market recovery
During FY19, the retail market in India was recovering from the
impact of demonetisation and adoption of GST. As a result, many
online retailers and marketplaces discounted deeply to drive sales
and clear legacy stocks. In this climate, I am pleased that Koovs
purposefully followed a different strategy to focus on driving
higher value sales, operational efficiency and customer
satisfaction rather than volume, supporting our position as an
exciting, aspirational and trusted brand.
Bearing in mind this continued challenging environment
experienced in the first half of FY19, our primary focus was to
conserve cash by reducing marketing and stock levels, with
management's time primarily spent securing new funding to support
Koovs growth. Despite this, we were able to maintain our brand
awareness, increase customer engagement through our social media
channels, and deliver market-leading customer satisfaction, which
the Board strongly believes demonstrate the resilience and strength
of the Koovs brand.
Our strategy to drive higher sales value has paid off and I am
pleased to report a positive increase in trading margin from 14% to
18%. We have also continued to deliver a fantastic service for our
customers, being named for the second year running by Forrester
Research as the No.1 online retailer for customer experience in
India. Our marketing strategy to focus on social media, exclusive
content and smart partnerships with Indian celebrities has proved
highly cost effective and has established Koovs as the leader in
customer engagement - with 2.6m social media followers, more than
three times the engagement of our nearest competitor.
The Group was able to rebuild stock levels in the second half of
the year and resume its marketing activities which delivered
encouraging signs of recovery with Gross Order Value ("GOV"- value
of orders placed) increasing to GBP8.0m, 65% ahead of the first
half, delivering total GOV of GBP12.8m for FY19.
Outlook
Koovs is now back on track, and I am extremely excited about the
Company's growth prospects for the years ahead. I would like to
take this opportunity to thank all our colleagues in the UK and
India for their continuing hard work, dedication and
enthusiasm.
Waheed Alli
Chairman
16 July 2019
STRATEGIC REPORT
THE MARKET
'India is coming online at an unprecedented rate' Google, Year
in Search - India 2018
India has continued to impress with its digital expansion.
Already the second largest country globally of internet users with
560m people connected and penetration at 40%, according to Google's
Year in Search Report India is coming online at an unprecedented
rate, adding an average of 40 million new users a year.
According to Bain & company
'India is at a critical stage in its digital journey, with
substantial growth potential in usage and transactions.'
Demographically India's penetration is 55% in urban areas v 15 %
in rural with 33% male and 22% female. With significant potential
for growth, India's online transactors are spending
$224 per person per year, which is 1/10th of China's ($1862). In
fact, 68% of those buying products online are under 35 with 90% of
transactions currently from the urban pocket.
Google highlights three key trends:
'Bharat is going online - Fastest Growth is now in
Non-Metros'
Where growth has so far been primarily driven by adoption in the
top cities, the fastest growth is now being seen in non-metro areas
and this is being driven by smartphone adoption, says Google. This
marks a step change in online adoption in India and is a
significant opportunity for further ecommerce reach and growth.
Redseer Research also highlights online fashion growth for
Tier2+ city consumers with growth of 66% in Q1 2019 calendar year
and spend expected to reach $10bn run rate by the end of 2019. This
would be a landmark indeed, putting the online fashion market
within touching distance of 10% share of overall fashion spend.
'Online video is a great success story in India - expected to
reach 500m users in 2020'
Driven by smartphones, where the average smartphone user is
viewing over 36 minute of online video a day, 'Video is already
shaping how customers gather information and how they shop.'
In fact, India now tops the world in hours spent on video
streaming apps spending 47bn hours a year, ahead of Brazil at 22bn
hours - App Annie's 'State of Mobile 2019 Report'.
Mobile - a critical enabler - Mobile data use in India has now
reached 8Gb per month - equivalent to that of mature mobile markets
according to Bain, with major network operator Reliance Jio stating
that their 280m customers use on average 10Gb of data a month.
'Omnichannel shopping - the growing confluence of online &
offline'
Online and offline are now converging to provide a great
customer environment. 55% of customers say they have used online
video while shopping in store. This is a great indicator for
retailers who are investing in digital marketing to get market
advantage and embracing the blended online-offline world.
Online Fashion Growth
Fashion remains a dynamic and fast-growing category. While
online retail is growing at 27% CAGR, apparel online is growing
even faster at 30% CAGR and is forecast to reach $14.7bn in 2022.
In this space Koovs addressable market for online Western fashion
is expected to achieve $6.8bn in the same timeframe. (Hardman &
Co 2018)
Strategy
Our goal is to be the No.1 online western fashion destination in
India.
Our Strategy is to build the Koovs business by:
-- Amplifying the Koovs Brand;
-- Expanding our Product Range;
-- Engaging our audience through Content;
-- Extending our Reach; and
-- Maximising Technology to empower our customers and give Koovs a competitive advantage.
This strategy has already delivered a strong and unique position
in the Indian market where Koovs is building on our reputation as
the brand that is: Famous for Fashion, offering Great Choice &
Affordable Style, benchmarked as No. 1 for Customer Experience,
noted for 1(st) Class Content & Social Media Engagement, with a
seamless Mobile-First Technology experience.
For the second year running, in November 2018 Koovs was named
No.1 in India for customer experience in online retail by Forrester
Research, ahead of Amazon and Flipkart. We were voted one of Asia's
Most Trusted Brands by IBC Corporation's Asia Awards in August
2018, and with 2.6m social followers, we remain the recognised
leader for engagement, winning the prestigious SAMMIE award for
Best Social Media Brand in Fashion Apparel also in August 2018.
FY19 Objectives
Our objectives during FY19 were to conserve cash and to secure
new funding that would support Koovs growth. In H1 FY19, we
successfully secured GBP22m of funds with commitments for a further
GBP23m to deliver on the Group's ambitions to achieve scalable
growth over the coming years.
During the year, the Board has demonstrated its experience and
expertise, taking the decisions necessary to protect the Koovs
brand and to conserve resources during a period of turmoil caused
by demonetisation and the implementation of Goods and Services Tax
(GST); this included reducing marketing costs and stock levels. In
this climate, Koovs purposefully followed a strategy to focus on
driving higher value sales, operational efficiency and retain its
premium position. As a result, and despite a challenging retail
environment, Koovs GOV stood at GBP12.8m and trading margins
increased from 14% to 18% for FY19. Revenues increased from
GBP6.35m to GBP6.43m, a 9% increase at a constant exchange rate,
with a reduction in gross loss from GBP1.72m to GBP0.53m. We were
also able to maintain brand awareness, increase customer engagement
through our social media channels, and deliver market-leading
customer satisfaction, demonstrating the resilience and strength of
Koovs, as well as supporting our position as an exciting,
aspirational and trusted brand.
Strategic Investment
The calibre of the new strategic partnerships with both FLFL and
HT Media, over the period, is testament to the strength our brand
has in India. The new funding has put Koovs back on track, allowing
management to refocus its efforts on the day-to-day operations and
resume its growth plan over the coming years.
HT Media, one of India's largest media companies and owner of
the Hindustan Times - announced their media-for- equity investment
on 22 August 2018, worth up to GBP17.1m over four years, of which
GBP4.3m was invested in FY19.
FLFL, part of Future Group, one of India's largest retail
groups, invested GBP5.8m in July 2018 and subscribed for a further
GBP10.5m in FY20 (of which GBP3.7m has already been received).
Our relationship with FLFL was further strengthened following
the appointment of Avni Kishore Kumar Biyani, a director of FLFL,
as Non-Executive Director of Koovs with effect from 1 January
2019.
The strategic partnership with FLFL represents a rewarding deal
for Koovs and is expected to deliver synergies across the value
chain from manufacturing and distribution to market reach,
marketing and customer engagement.
In addition to the strategic investments, directors and other
investors invested a further GBP12m in July 2018.
Developing Strategic Synergies with FLFL
Since completing the first stage of FLFL's investment in Koovs,
both companies have moved quickly to leverage synergies and
opportunities for both businesses.
In October 2018, Koovs was able to launch its first physical
retail spaces with Koovs Private Label concessions in three of
FLFL's Central department stores in New Delhi. We now have a
further five stores scheduled in Bangalore (2 stores), Hyderabad,
Pune and Noida in H2 FY20.
At the same time, Koovs has been integrating high profile global
brands like Lee Cooper and Converse, licenced exclusively to FLFL
in India and signature house brands, including Cover Story and
Indigo Nation, to enhance the brand offering on Koovs.com while
retaining a strong trading margin.
In return, Koovs is already providing technical and marketing
services to FLFL, with a $1.4m technical services contract to build
and support (for a period of 24 months) FLFL's first ecommerce
platform, based on Koovs proven and market-leading microservices
platform, for the Brand Factory retail format. We also signed an
agreement in December 2018 to hire the use of Koovs Studio Services
for fashion photography and video for up to 1,000 products a
month.
Having made significant progress already, Koovs and FLFL will
continue to develop new opportunities and maximise synergies to
benefit both businesses.
Strategic Highlights
Brand - Famous for Fashion
In FY19, we have continued to build and amplify the Koovs brand
and brand position as Famous for Fashion with India's youth.
While H1 FY19's marketing spend was significantly reduced due to
cash conservation, highly targeted digital and social marketing
maintained high brand visibility with our target audience. By
promoting the Koovs app extensively through our digital
campaigns and a new execution of the highly successful 'Step into
Koovs' campaign, Koovs is recognised as the brand offering a
seamless mobile customer experience and a lifestyle choice to enjoy
fashion and life on the go.
Koovs was named one of Asia's Most Trusted Brands by IBC
Corporation's Asia Awards in August 2018 and was rated No. 1 for
Customer Experience for the second year running by Forrester in
November 2018 and noted for 1st Class Content & Social
Engagement, we have also further advanced our position as the
Fashion Authority by providing exclusive, rich, relevant and
current fashion editorial to inform, inspire and encourage
customers to wear the latest trends with confidence.
As a result of our successful fundraising, in August 2018 Koovs
also signed a strategic four-year media for equity deal with
existing investor HT Media, which ensures we can continue to build
the Koovs brand strategically and cost effectively through HT
Media's key channels over the next four years.
Following the HT Media deal and with the new transformational
investment by FLFL announced in July 2018, Koovs is already
maximising opportunities for the brand, launching the Koovs Private
Label in FLFL's Central retail department stores.
Products - Great Choice & Affordable Style
Design authenticity and exclusivity are key to Koovs position as
the authority in affordable western fashion. Koovs exclusive
Private Label continues to be the flagship brand on Koovs.com,
leading
in prominence and generating 42% of sales.
In a market characterised by deep discounting, Koovs decision to
protect the brand and retain premium quality and price, has helped
to deliver a significantly improved trading margin of 18%, an
increase of 29% on the 14% delivered in FY18. In H2 FY19, after
successfully securing new funding and post cash conserve, product
range expansion was resumed, boosting Q4 FY19 Gross Order Value by
67% to GBP4.4m.
On Koovs.com, the curated range of famous brands represents 58%
of sales, with many lines exclusive to us. The choice of brands has
been further enhanced with the addition of some of FLFL's premium
licenced global brands such as Converse and Lee Cooper, as well
as FLFL's own leading brands, Cover Story and Indigo Nation.
Designer Collaborations
Kunal Rawal X Koovs, our third statement menswear designer
collaboration, was launched in November 2018. The collection
featured the young, versatile and highly wearable combination of
traditional long-line silhouettes with contemporary streetwear that
has proved very popular with Rawal's celebrity Bollywood
clients.
Most recently in FY20, Koovs has also launched two new high
profile collaborations as the Style Partner for blockbuster young,
rom-com Student of the Year 2 in May 2019 and a stunning new
designer collaboration, Shivan & Narresh X Koovs featuring the
duo's acclaimed exotic, print inspired designs.
Content - 1(st) Class Editorial & Social Media
Creating the right content and two-way engagement is essential
to convince customers our brand is credible and relevant to
them.
With social media followers reaching 2.6m and visits to
Koovs.com showing year on year growth of 133% in Q4, editorial
content and social media campaigns have been more successful than
ever in FY19. Across the year, eight campaign reached a total of
425m people, engaging with 12.5m motivated social fans.
Seven established and up and coming Bollywood stars Taapsee
Pannu, Huma, Ahaan and Alanna Panday, Diana Penty, Akhil Akkinen
and Rakul Preet Kaur brought their personal style to our Koovs
collections with fashion diaries from London, Rome and Dubai.
#KoovsLondonDiaries alone reached 92m audience, engaging with 3.7m
and we also had our most successful ever User Generated Campaign
(UGC) - #everystreeturcatwalk delivered 102m reach and 2.9m
engagement. As a result, Koovs social media excellence was
recognised in August 2018 with a prestigious SAMMIE award for Best
Social Media Brand in Fashion Apparel.
May 2019 New Movie Collaboration
Our most recent collaboration in FY20 as the Styling Partner
with blockbuster rom-com film Student of the Year 2, with three of
Bollywood's hottest young stars - Tiger Shroff, Tara Sutaria and
Ananya Panday has featured across Koovs social channels.
Extend Reach - To New Customers & Retail Spaces
In collaboration with our strategic partner and investor FLFL,
Koovs Private Label launched retail concessions in FLFL's Central
department stores. Three concessions were opened in Delhi stores
commencing in October 2018 with an additional five new stores in
Bangalore (2), Pune, Hyderabad and Noida due to open in H2 FY20.
This move not only takes the Koovs brand into physical retail for
the first time, it also gives our customers more options in how
they can choose to browse, shop and interact with our brand.
Mobile-First, Market-Leading Technology
Koovs target young customer in India is technology savvy and an
avid smartphone user, living life on the go. With over 75% of
traffic and transactions delivered via our app and mobile site, our
technology strategy continues to deliver on customer engagement and
satisfaction with the Koovs App now a prominent part of our
marketing campaigns.
Koovs Platform
The Koovs market leading microservices platform was chosen by
our investor and India's largest retail operator FLFL to provide
the technology platform for its first move into ecommerce with the
Brand Factory retail format. The deal, announced in March 2019,
represents a $1.4m Technical Services Contract and proves our
potential to license Koovs platform and technology expertise.
Trading Performance & KPIs
Trading Performance
For the first seven months of the year trading was impacted as
stock levels and marketing were reduced to ensure the Group had the
cash runway required to secure funding. With funding received and
the Group back on track, the final quarter of the year has produced
excellent results, with further improvements in trading margin and
Gross Order Value up 67% to INR405m / GBP4.4m compared to the
previous year. Group revenues, including the sales of Technical and
other services increased by 9% from INR543m / GBP6.4m to INR 590m /
GBP6.4m. Whilst the impact of the first seven months of trading has
caused an overall decline in GOV, Net Sales and Conversion, the
performance in Q4 together with improvements made during the year
to products, technology and supply chain have increased the full
year trading margin by 7% from INR114m to INR123m. This improvement
in underlying margins along with the acceleration of sales and
traffic in Q4 provide a strong platform for the return to full year
growth.
Key performance indicators
The Group supplies branded fashion garments and accessories for
exclusive distribution through the Koovs.com website including
international fashion brands, iconic British high street brands and
Koovs Private Label product designed by a talented team based in
London.
We monitor the Group's performance in a number of ways including
assessing the performance of Koovs.com, which, although it is
operated by Marble E-retail Private Limited ("Marble"), an
independently owned and managed company, reflects the performance
of the products and marketing managed by the Group.
Over the past year, compared with the previous year, we have
achieved the following:
Year ended Year ended
Definition March 2019 March 2018 Movement
Gross order
value* Value of orders placed INR1,178m/GBP12.8m INR1,259m/GBP14.8m -6%/-13%
Gross order value less
Net sales* returns, less tax INR691m/GBP7.5m INR817m/GBP9.6m -15%/-21%
Visits to the
site* Website traffic 75.9m 65.9m -+15%
% of website visits
Conversion*(1) that place an order 1.1% 1.4% -17%
Trading margin* See note below INR123m/GBP1.3m INR114m/GBP1.3m +7%/+0%
Trading margin Trading margin as %
%* of net sales 18% 14% +28%
Wholesale revenue of
Revenue Koovs plc INR590m/GBP6.4m INR543m/GBP6.4m +9%/+0%
Loss before interest,
tax, depreciation, amortisation
Adjusted EBITDA and non-cash share-based
Loss payment charges INR1,183m/GBP12.9m INR1,183m/GBP13.9m +0%/+7%
Loss before
tax Reported loss INR1,423m/GBP15.5m INR1,312m/GBP15.3m -8%/-2%
*in relation to the Koovs.com website and non-IFRS measures.
Note: The Group gross margin reported in these financial statements
is the margin generated on sales of product to Marble, the operator
of the Koovs.com website. Due to foreign direct investment rules
Koovs India cannot currently ship directly to the end consumer. Trading
margin is the implied gross margin that would be reported in the
Group's accounts if Koovs India were able to ship products directly
to the end consumer, and is a key performance indicator of the Group.
(1) Conversion rates have increased to 1.3% in Q1 FY20
To assist UK-based readers of the financial statements,
translations into GBP (GBP) have be supplied on a memorandum basis
to allow a clear understanding of the results and financial
position of the business. The memorandum information has not been
audited and does not form part of the financial reporting of the
Group representing, as they do, simple translations of the Rupee
information.
Outlook
The Indian consumer market presents a huge opportunity as the
fastest growing major world economy in a digitally-driven
democracy. The ecommerce market is still in its early stages and is
considered the last big world retail market to move online. The
opportunity for growth is significant with major global players
like Amazon, Walmart, eBay and Facebook investing in India. Recent
forecasts show the ecommerce market growing from $24bn in 2017 to
$84bn in 2021 and $200bn in 2026. Online fashion is expected to
grow from a $4bn market in 2017 to a $15bn market by 2022.
Koovs is an established brand with award-winning customer
experience and is well positioned to take the lead in growing the
online western fashion category, becoming the western fashion
experts for online Indian consumers.
This is already evidenced by the success of our social media
campaigns with 2.6m social followers and the highest levels of
content engagement in the industry.
Building on the success in the last three months of FY19 we
expect to return to significant full year growth in FY20 with a
focus on securing continued improvement in trading margins. The
recently secured funding will provide investment in marketing to
increase traffic levels, and an expansion of the product offering,
lifting conversion rates.
Current trading is in line and on target to deliver market
expectations for FY20.
Finance Review
The financial results of the Koovs plc Group in this report
cover the year ended 31 March 2019.
The Group's principal activity is that of supplying branded
fashion garments and accessories for sale by a third party through
a branded website principally in the Republic of India.
Financial results
Revenue and gross loss
The Group achieved revenue of INR589.9m/GBP6,427k (2018:
INR543.2m/GBP6,350k) during the year from the wholesale of fashion
garments and accessories, and the provision of technical and studio
services. Gross loss on this revenue was an improvement on previous
years at INR48.8m/GBP532k (2018: INR147.0m/GBP1,718k).
Operating expenses
Operating expenses comprise the costs of the design and
merchandising team in the UK, the creative, content, marketing and
IT teams in India, infrastructure costs, marketing expenditure and
corporate costs. Altogether this amounted to INR1,232.7m/GBP13,431k
(2018: INR1,100.0m/GBP12,857k) to give an operating loss of
INR1,281.5m/GBP13,963k (2018: INR1,247.0m/GBP14,575k). This
includes non-cash share-based payment expenses of INR85.3m/GBP930k
(2018: INR52.9m/GBP619k), amortisation and depreciation of
INR12.9m/GBP141k (2018: INR11.3m/GBP132k).
Financial income and expense
Financial income comprises of interest receivable in India and
amounted to INR25.8m/GBP281k (2018: INR18.8m/GBP220k) and financial
expense arises mainly from accrued interest payable on the
convertible loan notes and amounted to INR167.4m/GBP1,824k (2018:
INR84m/GBP982k). This gave a loss before tax of
INR1,423.1m/GBP15,506k (2018: INR1,312.2m/GBP15,337k).
Taxation
Due to the losses generated in the period, and the likelihood
that it will be some time before tax losses can be utilised, no
deferred tax has been accounted for and therefore there is no tax
charge or credit in the current or prior period.
Loss for the period
The loss for the period was INR1,423.1m/GBP15,506k (2018:
INR1,312.2m/GBP15,337k). The Indian ecommerce market is still in an
early stage and is expected to grow significantly over the coming
years. The current scale of the business means that manufacturing
volumes are too low to generate a gross profit leading to an
overall loss.
Basic earnings per share
Earnings per share amounted to a loss of 4.9 rupees/5.3 pence
per share based on the loss attributable to equity holders of
INR1,423.1m/GBP15,506k and weighted shares in issue of 293,165,252.
The loss per share in the previous period was 7.5 rupees/ 8.3 pence
based on the weighted shares in issue of 175,383,691.
Cash flow and funds
Operating Activities
During the year to 31 March 2019 the Group utilised
INR1,443.6m/GBP15,729k (2018: INR1,191.2m/GBP13,922k) in operations
mainly funding the operating losses of INR1,423.1m/GBP15,506k. This
included an increase in working capital of INR256.5m/GBP2,846k for
the prepayment of media assets related to the investment by HT
Media, excluding which the cash utilised in the year would be
INR1,187.1m/GBP12,883k.
Investing activities utilised INR199.0m/GBP2,168k as funds
raised were deposited in fixed term accounts to maximise financial
income. Financing activities in the year, primarily through the
issue of equity, raised INR1,884.7m/GBP20,534k.
As a result of these movements, the net increase in cash and
cash equivalents was INR242.1m/GBP2,637k (2018: net decrease of
INR146.8m/GBP1,715k). The closing net cash and cash equivalents was
INR310.7m/GBP3,447k (2018: INR34.5m/GBP404k). Taken along with the
bank deposits the Group had access to INR747.2m/GBP8,289k (2018:
INR252.9m/GBP2,766k) at the end of the financial period.
Financial position
At the end of the financial period the net assets of the Group
amounted to INR1,331.8m/GBP14,776k (2018: INR716.2m/GBP7,837k).
This included INR621.2m/GBP6,892k of goodwill arising from the
acquisition of Koovs India. Indian Goods and Services Tax (GST)
legislation and its application allow any unutilised input credits
to be carried forward for an indefinite period and on a
transferable basis. As such, to the extent this legislation remains
as enacted and applied, any unutilised GST input credits are
recognised as an asset in full in the consolidated statement of
financial position.
Principal risks and uncertainties
There are a number of market and business risks that could
affect the Company and the Group. We set out below the Group's view
of the main risks which, should any materialise, could materially
adversely affect the Group's business, financial condition and
returns to shareholders. Further risks and uncertainties which are
not presently known to the Directors at the date of this document,
or that the Directors currently deem less significant, may also
have an adverse effect on the business, financial condition or
results of the Group.
Funding
The Group's business plan envisages a period of investment in
marketing and product in order to grow the business to significant
scale and through to profitability.
During the financial year total funding of GBP22m has been
raised. GBP12.0m from investors and directors; GBP5.8m through a
strategic investment from FLFL, part of Future Group, a major
retailer in the Indian market; and GBP4.3m through a media for
equity deal from HT Media Ltd, part of the Hindustan Times group of
companies, a major media company in India. On 7 May 2019 FLFL
signed a subscription agreement to invest further GBP10.5m in two
tranches, the details of which are given below. HT Media Ltd have
conditionally agreed to provide an additional GBP12.9m of equity
for media to be drawn down in three tranches when required by the
Company.
It should be noted that since 31 March 2019, the Group has
received GBP3.7m of the GBP10.5m further strategic investment from
FLFL ("First Tranche"). An additional investment from FLFL of
GBP6.8m, the ("Second Tranche"), for 24,010,937 compulsorily
convertible preference shares instrument (CCPSs) has also been
subscribed for subject to receipts of fund, which is expected in
several stages within the calendar year. These are convertible on
the first anniversary of issue (or at the option of FLFL at an
earlier date) into 24,010,938 new Ordinary Shares. The implied
investment price is approximately 28.36p per new Ordinary Share,
which when combined with the investment into the "First Tranche"
implies a blended investment price by FLFL for the full investment
of approximately GBP10.5m at 15p per new Ordinary Share. This
investment was conditional on the directors receiving the authority
from shareholders to issue the CCPS, and this authority was granted
at the EGM held on 25 June 2019.
The Board is confident that any additional funding required
beyond that referred to above will be secured in due course.
Market and Economic Risks
Economic outlook
The Group's revenue is dependent on the sales by Koovs India to
Marble which, in turn, is dependent on the retail sales Marble
achieves, so the Group is sensitive to the impacts of the general
economic climate in India and on the population's propensity to
spend on fashion clothing and accessories. Global economic factors
may impact the costs of inputs such as cotton and fuel and the
Group's ability to pass on such cost increases may be limited. The
Board monitors projections for the Indian economy on a regular
basis and amends plans based on the expected growth.
Market and competition
The retail fashion industry and market are subject to changing
customer tastes. The Group's performance is dependent upon
effectively predicting and quickly responding to changing consumer
demands and translating market trends into saleable merchandise.
Internet fashion retailing is global and highly competitive. Any
failure by Koovs.com to compete effectively with bricks and mortar
retailers and other internet retailers may affect the Group's
revenue. The Group uses third parties to provide assessments of the
developments of fashion in the global markets and designers attend
international trade shows to provide direction and inspiration.
Suppliers
The Group make arrangements with manufacturers for the supply of
products designed by the Group. The ability to source products
promptly at competitive prices and of an appropriate quality is key
to the success of the business and while there is a broad range of
potential suppliers and well-developed competition in the market,
the Group is dependent on being able to find appropriate
manufacturing capability for its products in order to meet
delivery, quality and price expectations. The Group uses a broad
range of suppliers within the Indian market and also
internationally and ensures that there is no concentration of
supply. The employment of experienced sourcing experts ensures
access to a broad range of manufacturing capability.
Foreign country and political risk
Most of the Group's personnel, operations and other assets
including Koovs India's warehouse, all inventory and computer
servers are located in India and, consequently, the Group is
subject to changes in regulations or market conditions in that
country. With the majority of operations located in India, local
management maintain close monitoring of local developments and
amend plans as necessary.
Financial risks
Interest rate risk
The Group's exposure to interest rate risk arises from the
fluctuations in the 3 month sterling LIBOR rate impacting the
interest payable on the Convertible Loan Notes, and rate of
interest income or charges on cash and cash equivalent balances. In
the period under review, the Group has operated in a net cash
position. UK interest rates continue to be very low and therefore
the potential adverse interest rate risk in the UK is very low.
Interest rates in India are in the region of 7.0% and the majority
of the Group's cash is held in Indian Rupees in India. There is
therefore a potential adverse interest rate risk affecting the
interest income generated in India. No interest rate hedging is in
place. The bank deposits are made for a variety of tenures to
balance liquidity and security of interest generation.
Currency risk
The Group operates in the United Kingdom and India. Following
the acquisition of Koovs India, all revenues and the majority of
costs are denominated in Indian Rupees. However, around 30% of the
Group's overheads are incurred in Sterling and therefore the Group
results are susceptible to fluctuations as a result of changes in
exchange rates. No foreign currency hedging is in place to mitigate
this risk.
Credit and customer risk
The Group's revenues arise predominately from invoices for goods
to a single customer. As Marble is currently the only channel
through which Koovs India's products are sold to consumers, the
Group's revenue is dependent upon the relationship with Marble and
upon the success of Marble in servicing its customers, delivering
products as promised, recovering payment from its customers and
maintaining high levels of customer service. The Group has
considered the credit risk associated with the customer and has
assessed the credit worthiness of the customer to be good. The
Group minimises the risk through a requirement for prompt, monthly
payment of invoices issued to which the customer is committed and
has demonstrated consistent adherence.
Liquidity risk
Liquidity risk is managed through the assessment of short,
medium and long-term cash flow forecasts to ensure the adequacy of
funding in order to meet the Group's working capital requirements.
Where a shortfall in funding is identified the Group will look to
meet this shortfall though a variety of funding options including
but not limited to the issuing of new equity and convertible
debt.
Other risks
Technological risks
The Group is dependent on its IT infrastructure and any system
performance issues (for example system or infrastructure failure,
damage or denial of access) could seriously affect our ability to
trade. The infrastructure has been designed specifically for
robustness, flexibility and scalability and these objectives form a
core part of the IT development strategy.
Warehouse disruption
Any disruption to the Group's warehousing facility due to
physical property damage, breakdown in warehouse systems, capacity
shortages or poor logistics management could lead to significant
operational difficulties in order fulfilment, which may have a
consequent adverse effect on the Group's business. The Group has
recruited an experienced logistics manager to oversee these
operations.
Intellectual property and content liability
The business of the Group carries with it the risk of
intellectual property right infringement. The Group may need to
engage in litigation to enforce its intellectual property rights,
or to protect itself from third party claims. Our designers are
professionally trained to ensure that intellectual property rights
are appropriately handled. Competitors' products are regularly
monitored and any infringement brought to managements'
attention.
Key personnel
The Group depends on the services of its key technical,
marketing and management personnel. The Group personnel structure
is being developed as the business grows to provide appropriate
quality, depth of experience and succession planning.
On behalf of the Board of Directors.
Waheed Alli Robert Pursell
Director Director
16 July 2019 16 July 2019
CONSOLIDATED STATEMENT OF PROFIT AND LOSS
for the YEAR to 31 March 2019
MEMORANDUM
Year to Year to Year to Year to
31 March 31 March 31 March 31 March
2019 2018 2019 2018
Notes INRm INRm GBP000 GBP000
3 Revenue 589.9 543.2 6,427 6,350
Cost of sales (638.7) (690.2) (6,959) (8,068)
Gross loss (48.8) (147.0) (532) (1,718)
Operating expenses (1,232.7) (1,100.0) (13,431) (12,857)
4 Operating loss (1,281.5) (1,247.0) (13,963) (14,575)
Finance income 25.8 18.8 281 220
Finance expense (167.4) (84.0) (1,824) (982)
Loss for the year before tax (1,423.1) (1,312.2) (15,506) (15,337)
Tax expense - - - -
Loss for the year (1,423.1) (1,312.2) (15,506) (15,337)
Loss attributable to:
Equity holders of the Company (1,423.1) (1,312.2) (15,506) (15,337)
Loss for the year (1,423.1) (1,312.2) (15,506) (15,337)
Loss per share
5 Basic and diluted loss per share INR(4.9) INR(7.5) (5.3)p (8.3) p
All results relate to continuing operations.
Consolidated Statement of COMPREHENSIVE INCOME
FOR THE YEAR TO 31 March 2019
MEMORANDUM
Year to Year to Year to Year to
31 March 31 March 31 March 31 March
2019 2018 2019 2018
INRm INRm GBP000 GBP000
Loss for the year (1,423.1) (1,312.2) (15,506) (15,337)
Other comprehensive profit or loss
Items that may be reclassified to
Income Statement
in subsequent periods:
Currency translation differences
from operations
denominated in currencies other
than Rupee -
equity holders of the parent, net
of tax 44.1 (30.5) 480 (356)
Other comprehensive profit or (loss),
net of tax 44.1 (30.5) 480 (356)
Total comprehensive loss for the
year (1,379.0) (1,342.7) (15,026) (15,693)
Total comprehensive loss attributable
to:
Equity holders of the Company (1,379.0) (1,342.7) (15,026) (15,693)
Total income and expense recognised
in the year (1,379.0) (1,342.7) (15,026) (15,693)
All results relate to continuing operations.
Consolidated Statement of Financial Position
AT 31 March 2019
Company ndeg 08166410
MEMORANDUM
31 March 31 March 31 March 31 March
2019 2018 2019 2018
Notes INRm INRm GBP000 GBP000
Non-current assets
Intangible assets 626.4 627.5 6,950 6,866
Property, plant and equipment 22.9 23.8 254 260
Non-current financial assets 8.0 6.8 88 75
Total non-current assets 657.3 658.1 7,292 7,201
Current assets
Inventories 213.1 140.3 2,364 1,536
Trade receivables, other
receivables,
prepayments and other assets 1,037.0 632.7 11,506 6,922
6 Bank deposits 428.5 211.5 4,754 2,314
6 Cash and cash equivalents 338.0 86.8 3,750 949
Total current assets 2,016.6 1,071.3 22,374 11,721
Total assets 2,673.9 1,729.4 29,666 18,922
Non-current liabilities
Loans and Borrowings - (708.2) - (7,748)
Other Long-term liabilities (9.3) (7.9) (103) (86)
Total non-current liabilities (9.3) (716.1) (103) (7,834)
Current liabilities
Short-term borrowings (27.3) (52.2) (303) (572)
Loans and Borrowings (849.0) - (9,419) -
Trade and other payables (456.5) (244.9) (5,065) (2,680)
----- -------------------------------- --------------- ------------------- --------------------- ----------------
Total current liabilities (1,332.8) (297.1) (14,787) (3,252)
Total liabilities (1,342.1) (1,013.2) (14,890) (11,085)
NET ASSETS 1,331.8 716.2 14,776 7,837
Capital and reserves
Equity share capital 332.6 168.0 3,690 1,838
Share premium reserve 7,942.8 6,196.6 88,127 67,799
Convertible debt option reserve 180.5 180.5 2,003 1,975
Other reserves 139.0 11.2 1,543 123
Retained earnings (7,263.1) (5,840.1) (80,587) (63,898)
TOTAL EQUITY 1,331.8 716.2 14,776 7,837
Consolidated Statement of Changes in Equity
FOR THE YEAR TO 31 MARCH 2019
Attributable to the equity holders of
the Parent
Convertible Share
Equity Share debt based Currency Total
share premium option payment translation other Retained Total
capital reserve reserve reserve reserve reserves earnings Total equity
INRm INRm INRm INRm INRm INRm INRm INRm INRm
At 31 March
2017 168.0 6,196.6 - 38.9 (46.8) (7.9) (4,527.8) 1,828.8 1,828.8
-------------- --------- --------- ----------- -------- ------------ ---------- --------- --------- ---------
Loss for the
year - - - - - - (1,312.2) (1,312.2) (1,312.2)
Other
comprehensive
loss - - - - (30.5) (30.5) - (30.5) (30.5)
Total
comprehensive
loss - - - - - (30.5) (1,312.2) (1,342.7) (1,342.7)
Share based
payments
reserve - - - 49.5 - 49.5 - 49.5 49.5
Convertible
debt
option
reserve - - 180.5 - - - - 180.5 180.5
-------------- --------- --------- ----------- -------- ------------ ---------- --------- --------- ---------
At 31 March
2018 168.0 6,196.6 180.5 88.4 (77.3) 11.1 (5,840.0) 716.2 716.2
-------------- --------- --------- ----------- -------- ------------ ---------- --------- --------- ---------
Loss for the
year - - - - - - (1,423.1) (1,423.1) (1,423.1)
Other
comprehensive
profit - - - - 44.1 44.1 - 44.1 44.1
Total
comprehensive
profit or
(loss) - - - - - 44.1 (1,423.1) (1,379.0) (1,379.0)
Equity issue 164.6 1,840.5 - - - - - 2,005.1 2,005.1
Cost of equity
issue - (94.3) - - - - - (94.3) (94.3)
Share based
payments
reserve - - - 83.8 - 83.8 - 83.8 83.8
At 31 March
2019 332.6 7,942.8 180.5 172.2 (33.2) 139.0 (7,263.1) 1,331.8 1,331.8
-------------- --------- --------- ----------- -------- ------------ ---------- --------- --------- ---------
MEMORANDUM GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------- --------- --------- ----------- -------- ------------ ---------- --------- --------- ---------
At 31 March
2019 3,690 88,127 2,003 1,911 (368) 1,543 (80,587) 14,776 14,776
-------------- --------- --------- ----------- -------- ------------ ---------- --------- --------- ---------
CONSOLIDATED STATEMENT of cash flows
for the YEAR to 31 March 2019
MEMORANDUM
Year to Year to Year to Year to
31 March 31 March 31 March 31 March
2019 2018 2019 2018
Notes INRm INRm GBP000 GBP000
Operating activities
Loss for the year (1,423.1) (1,312.2) (15,506) (15,337)
Adjustments to reconcile loss
for the year
to net cash flow from operating
activities
Depreciation and amortisation 12.9 11.3 141 132
Share based payment 85.3 52.9 930 619
Bad debt expense 5.1 13.6 55 159
Interest income and finance
expense 141.6 65.2 1,543 762
Working capital adjustments:
(Increase)/decrease in inventories (72.7) 47.6 (792) 556
(Increase)/decrease in trade
and other receivables (404.3) 78.1 (4,405) 913
Increase/(decrease) in trade
and other payables 211.6 (147.7) 2,305 (1,726)
----- ---------------------------------- --------- --------- --------- ----------
Net cash outflow from operating
activities (1,443.6) (1,191.2) (15,729) (13,922)
----- ---------------------------------- --------- --------- --------- ----------
Investing activities
Withdrawals/(deposits): original
maturity greater than 12m 1.4 (3.8) 15 (44)
(Deposits)/withdrawals: original
maturity less than 12m (217.0) 234.0 (2,364) 2,735
Purchase of non-current assets (9.2) (19.9) (100) (233)
Interest income received 25.8 18.8 281 220
----- ---------------------------------- --------- --------- --------- ----------
Net cash flow generated (used
in)/from investing activities (199.0) 229.1 (2,168) 2,678
----- ---------------------------------- --------- --------- --------- ----------
Financing activities
Proceeds from issue of shares 2,005.1 - 21,845 -
Costs of share issues (94.3) - (1,027) -
Proceeds from issue Convertible
Loan Notes - 813.4 - 9,507
(Repayment)/increase of short-term
borrowings (24.9) 3.5 (271) 41
Interest and finance expense (1.2) (1.6) (13) (19)
----- ---------------------------------- --------- --------- --------- ----------
Net cash flow generated from
financing activities 1,884.7 815.3 20,534 9,529
----- ---------------------------------- --------- --------- --------- ----------
Net increase/(decrease) in cash
and cash
equivalents 242.1 (146.8) 2,637 (1,715)
Cash and cash equivalents at
6 start of period 34.5 151.8 404 1,774
Exchange differences 34.1 29.5 406 345
----- ---------------------------------- --------- --------- --------- ----------
Cash and cash equivalents at
6 end of period 310.7 34.5 3,447 404
----- ---------------------------------- --------- --------- --------- ----------
NOTES TO FINANCIAL INFORMATION
1. Accounting basis
The financial information set out in this document does not
constitute the Company's statutory accounts for the years ended 31
March 2018 or 31 March 2019. Statutory accounts for the years ended
31 March 2018 and 31 March 2019, which were approved by the
directors on 16 July 2019, have been reported on by the Independent
Auditors. The Independent Auditor's report on the Annual Report and
Financial Statements for years ended 31 March 2018 and 31 March
2019 were unqualified and did not for both years contain a
statement under 498(2) or 498(3) of the Companies Act 2006 , but
for the year ended 31 March 2019 drew attention to a matter by way
of emphasis, over going concern.
The statutory accounts for the year ended 31 March 2019 will be
delivered to the Registrar of Companies in due course and will be
posted to shareholders shortly, and thereafter will be available
from the Company's registered office at Fourth Floor York House, 23
Kingsway, London, United Kingdom, WC2B 6UJ and from the Company's
website http://www.koovs.com/corporate/financial-reports.
The financial information set out in these results has been
prepared using the recognition and measurement principles of
International Accounting Standards, and International Financial
Reporting Standards and Interpretations adopted for use in the
European Union (collectively Adopted IFRSs). The accounting
policies adopted in these results have been consistently applied to
all the years presented and are consistent with the policies used
in the preparation of the financial statements for the year ended
31 March 2018, except for those that relate to new standards and
interpretations effective for the first time for periods beginning
on (or after) 1 January 2018. New standards impacting the Group
that have be adopted in the annual financial statements for the
year ended 31 December 2018 are IFRS 9 Financial Instruments and
IFRS 15 Revenue from contracts with customers. Other new standards,
amendments and interpretations to existing standards, which have
been adopted by the Group have not been listed, since they have no
material impact on the financial statements.
2. Going Concern
The financial statements have been prepared on the assumption
that the business is a going concern. The Directors have reviewed
the Company's and the Group's going concern position taking account
its current business activities, budgeted performance and the
factors likely to affect its future development, set out in the
Annual Report, and including the Group's objectives, policies and
processes for managing its working capital, its financial risk
management objectives and its exposure to credit and liquidity
risks. The Group made a loss for the year of INR1,423million
(approximately GBP15,506k), had Net Current Assets at the period
end of INR 683.8 million (approximately GBP7,587k) and a Net Cash
Outflows from Operating Activities of INR 1,444 million
(approximately GBP15,729k). The Group meets its day to day working
capital requirements through existing cash resources and had on
hand cash, cash equivalents and short-term deposits at the balance
sheet date of INR 747 million (2018: INR235 million) and as of the
end of June 2019 the Group had INR 607 million (approximately
GBP6,922k).
The Directors have reviewed the Group's cash flow forecasts
covering a period of at least 12 months from the date of approval
of the financial statements, which foresees that the Group will be
able to meet its liabilities as they fall due. However, the success
of the business remains reliant on the Group achieving an adequate
level of sales, driven by an appropriate level of marketing spend.
During the next 12 months the forecast level of costs will be
unlikely to be covered by the gross profit generated from sales. As
such there is a risk that the Group's working capital may prove
insufficient to cover such operating activities. In such
circumstances, the Group could be obliged to seek additional
funding through a placement of shares or source other funding. In
the absence of additional funding the Group has the ability to
reduce costs to ensure that existing cash resources together with
the funding described below are sufficient to enable the Group to
meet its liabilities for a minimum of 12 months from the date of
this report.
Furthermore, The Group is also dependent on the Group's
convertible loan notes not being redeemed, without being replaced
by an alternative form of funding - either fresh debt or equity.
The terms of this instrument, are set out in Note 19 to the FY18
financial statements, noting that they have recently been extended,
until February 2021. As the majority holder of the notes, the
Chairman of the Group, in addition now has the right to demand
repayment at any time during this term. Whilst not legally binding,
the directors have received confirmation from the Chairman that he
does not intend to seek their repayment for at least 12 months from
the approval of the financial statements.
It should be noted that since 31 March 2019, the Group has
raised GBP3.7m (approximately INR333.5m) of strategic investment
from Future Lifestyle Fashions Limited (FLFL). Furthermore, an
additional investment from FLFL of GBP6.8m (approximately
INR612.9m), the "Second Tranche" has also been subscribed for
subject to receipt of funds, which is expected to occur in several
stages within the calendar year. This investment was conditional on
the directors receiving the authority from shareholders to issue
the CCPS, and this authority was granted at the EGM held on 25th
June 2019.
The directors have concluded that the circumstances set forth
above represent a material uncertainty, which may cast significant
doubt about the Company's ability to continue as going concern.
However, they believe that taken as a whole, the factors described
above enable the Company to continue as a going concern for the
foreseeable future.
3. Revenue
Revenue recognised in the Income Statement is analysed as
follows:
MEMORANDUM
2019 2018 2019 2018
Revenue streams INRm INRm GBP000 GBP000
Sale of fashion garments 505.9 543.2 5,512 6,350
Technical Services 73.9 - 805 -
Concession sales 5.7 - 62 -
Studio Services 4.4 - 48 -
Total 589.9 543.2 6,427 6,350
------------------------- ------------ --------------- -------------------- ----------------------
MEMORANDUM
Primary geographical markets 2019 2018 2019 2018
INRm INRm GBP000 GBP000
India 588.2 512.5 6,409 5,990
UK 1.7 30.7 18 360
------------------------------ ------ ------ -------- --------
Total 589.9 543.2 6,427 6,350
------------------------------ ------ ------ -------- --------
MEMORANDUM
Timing of revenue recognition 2019 2018 2019 2018
INRm INRm GBP000 GBP000
Goods transferred at point in
time 511.6 543.2 5,574 6,350
Services transferred at a point
in time 78.3 - 853 -
--------------------------------- ------ ------ -------- --------
Total 589.9 543.2 6,427 6,350
--------------------------------- ------ ------ -------- --------
The Group's main operation was that of supplying fashion
garments at wholesale to third parties.
Operating segments
INR504.2m/GBP5,494k (2018: INR512.5m/GBP6,409) of the Group's
revenue is generated by Koovs India through its operations with
Marble Pvt.Ltd as a supplier of branded fashion products.
INR84m/GBP915k (2018: INR NIL/GBPNIL) of the Group's revenue is
generated by Koovs India through the agreement with FLFL;
providing, developing, hosting and maintaining an online platform
for FLFL's Brand Factory retail format ("Technical Service").
The chief operating decision maker is the Chief Executive
Officer who makes resource allocation decisions based on financial
statements and operating reports for the entire Group. The Group
therefore represents a single cash generating unit and a single
operating segment.
4. Operating loss
Operating loss is stated after charging:
MEMORANDUM
2019 2018 2019 2018
INRm INRm GBP000 GBP000
Auditor's remuneration Parent 6.7 7.0 73 82
Auditor's remuneration Subsidiary 2.2 2.3 25 26
Operating lease payments 36.8 27.5 401 322
Depreciation expense 10.2 10.5 110 124
Amortisation expense 2.9 0.7 32 8
Staff costs 372.0 337.2 4,053 3,941
Net foreign currency exchange loss - 0.3 - 3
Marketing cost 563.5 667.4 6,140 7,797
Inventory provision charge - 8.8 - 103
------- -------
All operating expenses are administrative by nature.
5. Earnings per share
Diluted earnings per share is calculated by dividing the
earnings attributable to the owners of the Parent Company by the
weighted average number of ordinary shares in issue during the
period, adjusted for the effects of potentially dilutive share
options. The effect of the share options in issue is anti-dilutive
and therefore no adjustment has been made to the weighted average
shares in issue for diluted earnings per share.
2019 2018
Weighted average shares in issue for basic earnings
per share 293,165,252 175,383,691
Effect of dilutive options - -
Weighted average shares in issue for diluted earnings
per share 293,165,252 175,383,691
Earnings attributable to the owners of the Parent
(INRm) (1,423.1) (1,312.2)
Basic and diluted loss per share - Rupees (4.9) (7.5)
Basic and diluted loss per share - Pence (5.3) (8.3)
6. Cash and bank deposits
MEMORANDUM
2019 2018 2019 2018
Group INRm INRm GBP000 GBP000
Current assets:
Bank deposits with an original
maturity of more than
12 months 1.0 1.0 11 11
Bank deposits with an original
maturity of not more than
12 months 427.5 210.5 4,743 2,303
Cash at bank and in hand 338.0 86.8 3,750 949
Total 766.5 298.3 8,504 3,263
Non-current assets:
Security deposits 8.0 6.8 88 75
Bank overdrafts (27.3) (52.2) (303) (572)
Total cash and bank deposits 747.2 252.9 8,289 2,766
2019 2018 2019 2018
Cash and cash equivalents INRm INRm GBP000 GBP000
Cash at bank and in hand 338.0 86.8 3,750 949
Bank overdrafts (27.3) (52.2) (303) (572)
Total 310.7 34.6 3,447 377
7. Events after the reporting date
On the 7 May 2019 Future Lifestyle Fashions Limited signed a
subscription agreement to invest GBP10.5m to provide further
funding for the Group business plan. This investment consists of
two tranches.
The "First Tranche" was for GBP3.7m for 45,839,063 new Ordinary
Shares, and these shares were issued by the directors and admitted
to AIM on the 30 May 2019.
The "Second Tranche" consists of 24,010,937 compulsorily
convertible preference shares instrument (CCPSs). These are
convertible on the first anniversary of issue (or at the option of
FLFL at an earlier date) into 24,010,938 new Ordinary Shares. The
implied investment price is approximately 28.36p per new Ordinary
Share, which when combined with the investment into the "First
Tranche" shares implies a blended investment price by FLFL for the
full investment of approximately GBP10.5m of 15p per new Ordinary
Share. This investment was conditional on the directors receiving
the authority from shareholders to issue the CCPS, and this
authority was granted the EGM held on 25 June 2019.
On the 16 July 2019 the term of the convertible loan notes was
extended from 24 months to 42 months, now ending in February 2021.
During this extended period the noteholders, subject to investor
majority consent, have the right to serve the company with a
redemption notice at their discretion.
8. Cautionary Statement
Koovs plc has made forward-looking statements in this press
release, including statements about the market for and benefits of
its products and services; financial results; product development
plans; the potential benefits of business relationships with third
parties and business strategies. These statements about future
events are subject to risks and uncertainties that could cause
Koovs plc's actual results to differ materially from those that
might be inferred from the forward-looking statements, Koovs plc
can make no assurance that any forward-looking statements will
prove correct.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR FMGMNLVDGLZM
(END) Dow Jones Newswires
July 17, 2019 02:00 ET (06:00 GMT)
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